Posts Tagged ‘Kickstarter for non-profits’

So what is this thing we call crowdfunding? What’s going on here? What words should we use to describe the phenomenon and the behavior that propels it?

Some of the coverage of Kickstarter can border on the nonsensical, so unable are people to understand what strange force it is that propels its success.  For some it is investing, but they get flustered when the behavior doesn’t accord with their notion of how investors act. Others see Kickstarter as a form of charity and get snarky at its perceived shortcomings. But in fact it’s neither of these things.

What it is, mostly, is shopping.

This understanding allows us to gain perspective on what’s happening and the likely market size of different crowdfunding platforms and approaches.

Two recent posts show the difficulties people have in characterizing what’s happening on Kickstarter.

Mashable looks at the phenomenon through an investment frame and declares to their evident disgust that “investors” on Kickstarter are not entirely rational. (Because “real” investors are paragons of rationality of course) with the nice even-handed headline “Are Kickstarter Investors Idiots or Geniuses?

The more cynical side of me wonders if we aren’t all being played. I mean, who wouldn’t watch these videos and want to make these projects a reality? I wonder if venture capitalists watch the pitches and laugh. Before they back something, they get a good look — a really good look — at the people, the product/prototype/project and the market. They know so much before they decide to invest at any level. For them, it’s all about measuring risk.

They go on to “wonder  if all of the buzz surrounding Kickstarter is now driving funds into projects that would otherwise never make it in the real world”, somehow excluding Kickstarter from their understanding of the “real world.” When you look at this behavior through the “investment” frame it can look strange, but when looked at through the shopping frame it makes perfect sense.

Meanwhile Crowdfund UK bemoans the lack of social impact of many of these projects who are, to their disappointment, acting like, well, most other technology or design startups:

OK Pebble were only expecting funding to cover 1000 watches and now 85,000 are pre-sold. There’s capacity and scale – and China is can knock out huge orders by their huge workforce in their huge factories. What’s the hurry? The campaign promised the watches by September. Would donors care if they were told that there a was a delay as they  were manufacturing in country – building the capacity of a recession hit area maybe? [This would be] good P.R. justifying the recent Jobs Act.

On Twitter the disappointment often takes on a more snarky or condescending tone as commentators confuse the fundamental reason why people are supporting Kickstarter projects:

Putting aside that StartSomeGood is a charity-oriented Kickstarter here too they are missing what’s really happening. Those who backed the Ouya video game console campaign on Kickstarter weren’t, in all likelihood, diverting money they would otherwise have given in charity. This came out of their consumption budget. That may bother you but then the issue you have is with capitalism, not with Kickstarter as such. But if instead of seeing it as just another market you think of Kickstarter campaigns as a form of very poorly-targeted charity, then your frustrations make sense, because you are operating in the wrong frame.

After raising a new record amount for a music project on Kickstarter Amanda Palmer (former lead  singer of The Dresden Dolls) got sick of dealing with this attitude as well and responded to some of the common questions on her blog:

Q: @JariPeltola
Are the donations tax-free income?

A: this is a good question mostly because of the way it’s worded.
to answer: no..all the money i’m making on CD and LP (and book, and everything) sales via kickstarter is taxable.
these aren’t DONATIONS. that drives me crazy. they way we generally define “donating” is that you are giving something without any return: it’s a selfless, one-way gift to a cause. this is not that. every single person who’s backed the kickstarter is getting a product or a service (like a show) that they’ve paid for.
it’s more of a pre-order than a “fundraiser.” the language here gets important. it makes me cringe to read in the press that people have “donated $600k to amanda palmer’s kickstarter.” that makes it seem like i’m getting away like a bandit. as you can see above,i have to PAY for and manufacture (and pay the staff to help me create) all the products that are for sale. it’s almost as ridiculous as newsweek proclaiming that “people donated over $56 million dollars to apple in order to own the new iPhone 4G”. that would sound DUMB. this is a marketplace. an art marketplace, but still. it’s a real exchange. i have A Thing (it’s A Weird Thing, but still) and people are buying it….via the vehicle of kickstarter.


Q: @cynicalinternet
deep question: didnt you feel guilty asking for handouts? like you should be able to get the money on your own somehow?

@cynicalinternet, your name is just perfect.
ask me that question again….slowly. and this time listen to yourself.
“like you should be able to get the money on your own somehow”?

There’s lots more of that sort of wisdom on her blog if you’re interested.

So let’s step back for a moment. Why do people give money to anything?

There are four basic motivations:
1.    A good or service we would like to consume (shopping)
2.    An expectation of future financial return (investment)
3.    A cause we care about and a change we want to support (philanthropy)
4.    A relationship we value (helping a friend or family member out).

While all of these factors are in play on Kickstarter with the exception of the still-illegal number 2, which is the driver of the mega-fundraisers you hear most about?

For mega campaigns like the Pebble Watch or Ouya it’s clearly number 1, shopping. People supported the Pebble Watch, the reigning Kickstarter fundraising champion, because they wanted a Pebble watch. It’s no more complex than that. The best name for what’s happening on Kickstarter (and Pozible in Australia) is pre-sale crowdfunding, as Amanda Palmer suggested. There’s a product you want and you can pre-order it, and in so doing provide the financial capital for that product to be produced. Charity this ain’t.

What is more charity-like is supporting projects because you want to see a social impact they are creating, an extrinsic reward, not because you want the intrinsic or material reward they are offering. This dynamic is strongly at place for campaigns on StartSomeGood and many on Kickstarter, Pozible and IndieGoGo as well, but it does not describe the success of the huge commercial fundraisers the commentators are usually trying to understand. Just as different markets focus on different types of goods (brand-name goods at Best Buy, hand-made at Etsy, second-hand at Craigslist) so too will different crowdfunding platforms likely success by focusing on these different forms of motivation.

Thinking about crowdfunding in this way also gives us a sense of how large the various markets will be. The question “can equity-based crowdfunding be as big as pre-sale [Kickstarter] crowdfunding?” is essentially asking if investing is going to be as big as shopping. Which is unlikely. When most people have a spare $125 to spend they usually put it towards something cool they want to consume, like a Pebble watch, and not into something which may, perhaps, provide a long-term financial return.

This isn’t to say that equity-based crowdfunding won’t be significant, it will be. It will create a new opportunity for entrepreneurs which will be enthusiastically and effectively embraced, leading to the launch of thousands of new companies. But it won’t surpass the amount spent on pre-purchasing books, CDs, concert tickets, technology, iPhone accessories and the like through platforms like Kickstarter.

We’re realistic about what this means for StartSomeGood, given our focus on the 3rd category of spending, philanthropy (with 1. and 4. playing very important roles as well). Few people put more into charity than they spend on their own consumption but many of us do put some portion of our income into good causes in order to support those less fortunate or to promote a change we wish to see in our community or the world. For some of us that portion is very significant and in aggregate the total contributed is huge.

Opening up this opportunity to new social innovators is critical to allowing new solutions to emerge and to empowering communities to create the future they need. We don’t need to be “bigger than Kickstarter” to realise this opportunity, we just need to be sustainable and effective in helping social entrepreneurs and non-profits to launch and grow socially impactful initiatives. (And we reject the comparison anyway, because we’re not competing with Kickstarter).

So thinking back to the crowdfunding (*ahem* peerfunding!) campaigns you have supported – what motivated your giving? And be honest, it’s okay to want cool stuff and get excited about new technology, but let’s understand that for what it is. And let’s complement that consumption by putting aside some funds to back social impact projects as well, because our world needs more changemakers and they need your support.

Image by THEfunkyman on flickr, made available on a creative commons license.


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Academy for Young Entrepreneurs poster (get a hard copy here)

Bill Drayton, founder of Ashoka and social entrepreneurship visionary, is fond of asking parents, firstly, “what would you do if your child was failing maths?” Parents instinctively have an answer for this. They would spend more time with them doing their home, get them a tutor, buy a math training program. Then he asked, “what would you do if your child was failing to develop as a changemaker?” and the answers come much less readily.

How do we create a culture of changemaking in young people? By giving them opportunities to share their ideas and participate in creating change of course!

You get better at maths by doing more maths. You get better at sport by joining a team,  practicing and playing. We have clear pathways for gaining expertise in academics and sports but it’s only more recently that we’ve begun to see a focus on providing changemaking experiences for people at a younger age and preparing them for active citizenship.

This is something Ashoka has understood for some time, having launched Ashoka Youth Venture over ten years ago to support 16-20 year-olds to develop their own initiatives, and more recently establishing AshokaU to foster a culture of entrepreneurship on college campuses.  In Australia we’ve seen the establishment of the School for Social Entrepreneurs, who run year-long courses supporting emerging social entrepreneurs of all ages to launch and scale social impact ventures and, on the opposite end of the spectrum, of Social Startup 48, a startup weekend-style event for aspiring changemakers. I’m proud to say all the above organisations are partners of StartSomeGood.

I’m also thrilled to see more and more organisations using StartSomeGood to fill gaps in this ecosystem of opportunity, inspiring, mentoring and training young people to create the future they wish to see.

One Can Grow finished a successful fundraiser on our site just a couple of weeks ago and is piloting a social entrepreneurship training program for students at three high school in Sydney. Hope Empowered is currently raising funds to engage an even younger cohort in entrepreneurial activity with their Academy for Young Entrepreneurs Initiative which will focus at the primary school level. (If you like the sound of this please chip in here). And the organisation I founded 12 years ago, Vibewire, has just, as of this writing, hit the tipping point of their StartSomeGood fundraising campaign to support three younger social entrepreneurs (under 35) to work on issues of critical importance including mental health and sustainable design.

At StartSomeGood we believe that social entrepreneurs need three types of capital to succeed: financial, intellectual and relational. Our mission is to reduce the barriers to raising early-stage financial capital for nonprofits and changemakers through peerfunding (also called crowdfunding). As these barriers come down more social entrepreneurs are stepping up to launch programs which general these other forms of capital, teaching skills and providing community for aspiring social entrepreneurs.

So these initiatives and those like them expand the answer to how to encourage your child to learn changemaking skills will become more apparent and a new generation of changemakers and entrepreneurs will, from an early age, know they can create the future we all need.

How do you think we could better support young changemakers?

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I got a knock-back letter from an incubator the other day. Their reason: “concerns about your ability to out-execute the incumbent.” They are talking, of course, about Kickstarter, the massively-successful website who introduced most people to the idea of crowdfunding. This is a common confusion but completely misplaced in our opinion. I decided to tackle the issue head-on with a post on the StartSomeGood blog, which I’ve re-posted below. I’d love your thoughts on whether this explanation resonates with you and how we can best express our unique value and purpose.

The importance of diversity

We all talk about abundance vs scarcity, knowing logically that there is an abundance of resources to accomplish whatever anyone might want to do in this world, and yet many (most?) people have traditionally struggled to unlock the support they need to pursue their dreams.

So what would it take for all worthy endeavors to get the support they need?

In the real world you would need a range of venues available for different art forms and events just as you find in most cities – some generalist, hosting everything from basketball to ice dancing to concerts, others art form-specific but presenting a variety of acts and genres while other venues specialize in particular genres or performance forms. There are venues for speeches and workshops, parties and performances, for making things together or sitting back and watching. The vitality of a cities culture relies on this diversity of opportunities.

And this is precisely how the crowdfunding landscape is also playing out. For individuals with a passion for anything at all, there is IndieGoGo. For US-based artists and creative entrepreneurs with a product, there is Kickstarter while in Australia there is Pozible and in France Ulule. For journalists there is Spot.us and for app developers there is AppBackr.

And for social entrepreneurs and changemakers focused on making the world a better place, there is StartSomeGood.

Why we are not competing with Kickstarter

It is specifically in relation to Kickstarter that most confusion on this point arises.

Here at StartSomeGood we have heard these questions numerous times:

  • How are you different to Kickstarter?
  • Aren’t you just a niche Kickstarter?
  • Why would people choose you instead of Kickstarter?
  • How do you intend to compete with Kickstarter?

The confusion here is related to Kickstarter’s huge mindshare, being the way many people found out about crowdfunding, but also largely on us. It is our job to explain how what we’re doing fits into the current fundraising landscape and the ways in which we are distinctive even as we work towards a similar vision. This post is an attempt to do that.

This belief that we are not competing with Kickstarter is both a philosophical position but also a practical observation of the different markets we serve. The confusion arises here I believe because with all the media attention to Kickstarter people only casually connected to the space often think of them as an all-purpose crowdfunding platform. This leads some to wonder how we will thrive with our (seemingly) more-niche platform focused on social change projects.

But Kickstarter is not an all-purpose platform, their focus is very clear: creative projects only. They are strict in maintaining their criteria (and explicitly prohibit “charity projects”) and have a particular style of project they prefer – one with a clear, productized outcome which can be shared or consumed. So Kickstarter are a niche platform, just as we are, but in both cases our respective niche’s are enormous. To be sure, there are some situations where there is overlap, such as in the instance of a film about a social issue, a political app or a food justice project. But the vast majority of the ventures we exist to serve simply cannot participate on Kickstarter’s platform due to either not being a creative product or being based outside the United States.

Rather than write another 1,000 words on this, here’s a little Venn diagram we hope will succinctly illustrate the point:

So the concept that people need to “choose us over Kickstarter” is accurate only in a few specific instances; for most social impact ventures Kickstarter is not actually an available choice.

Kickstarter has given rise to countless new films, gadgets and art projects; StartSomeGood to brand new social change organizations.  Kickstarter has empowered video game makers, iPhone gadgeteers and t-shirt designers; StartSomeGood has empowered changemakers of all ages and from many countries to pursue their dreams.  Rather than choosing one platform over the other, in most cases it’s clear from the start which site is the best fit for which project, with our shared purpose of providing an opportunity to rally supporters around your vision being the common denominator.

Given how much there is that needs doing in the world and the people looking for tools to help them make it happen we believe there is a significant business opportunity to do for the social sector what Kickstarter have done for the creative sector. But by far more importantly, there is a huge opportunity, indeed, a need, to empower and inspire thousands of changemakers to create the future they want for their communities.

Allies, not competitors

This opportunity speaks to a bigger and more important philosophical point. We believe that the world is abundant with possibilities: world-changing ideas and changemakers ready to make them happen. We exist to help those changemakers go from idea to action and impact. We have always been enormously inspired by the impact Kickstarter have had in the creative industries. We aim to democratize the social sector, creating opportunities for new types of projects, diverse organizational forms and a new generation of changemakers, just as Kickstarter is democratizing cultural consumption and the creative industries.

We are in fact huge fans of Kickstarter. I myself have supported 36 projects on Kickstarter, which puts me in the top 1% of project backers, given that 84% of Kickstarter members have given to just a single project.

The sectors we focus on are the two most in need of disruption, as funding decisions in both the creative and social change sectors have traditionally been made by small groups far removed from those who most benefit from the work produced. Now social and creative entrepreneurs can go around these traditional decision-makers and turn directly to their communities for the support they need.

We are proud to be part of this movement to break down barriers and provide the tools to help people do epic things. Rather than competing StartSomeGood and Kickstarter are creating the same future: one that is more democratic, open, participatory and exciting.

In Summary, How StartSomeGood is Different from Kickstarter:

  • They are for creative projects while we are for social impact projects;
  • They require a US bank account to launch a campaign while we accept projects from 110 countries (anywhere you can set up a paypal account);
  • They use an all-or-nothing model and we use a Tipping Point model;
  • Kickstarter was founded by creatives for creative entrepreneurs, StartSomeGood was founded by changemakers for social entrepreneurs.

If you are still unsure please get in touch and let’s talk about which platform might be right for you.

So, did that clear things up?

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